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Understanding the Basics of Virtual Office Phone Systems- PBX, IP PBX and VoIP

Office phone systems have been a norm since the time telephones became an integral part of business communication. It’s a known fact that businesses can’t survive without communication, especially long-distance voice communication since most people prefer to talk and get the job done. But the problem comes when the inbound calls exceed the devices or when the calls need to be delivered to a specific terminal based on certain conditions. Thus, the earliest form of Office Phone Systems came into being.

Our guide to Basics of Virtual Office Phone Systems is centered about the following three methods that have followed in the footsteps of the advancing technology. A good office phone system can turn the tides in your favor while a bad one can reverse it. Therefore, understanding the working concept and the advantages along with disadvantages is mandatory to choose the system that offers most benefits for a business.

PBX (or) Private Branch Exchange System

Private Branch Exchange or PBX can be regarded as the first form of office phone systems. The idea of PBX originated and implemented around late-mid 20th century when businesses couldn’t handle telephone calls using their fixed telephone lines which also were too expensive to own and maintain.

Until the last quarter of 20th century, PBX systems were completely analog and required a handful of human operators or receptionists to receive the call and redirect them to the exact line the caller needed to speak to. Though not very efficient, businesses had just one option rely on hired Call Centers or Receptionists to connect to their client. This was better than owning hundreds of individual phone lines but still, the margin of error and dropped calls were high enough.

The shadows of PBX as we know now became widely adopted when the switchboard electronics finally became reliable enough to trust and carry out intrinsic automated switching. This was one of the epitomes of technology back in a day when Logical-Programming was still in its infancy. The advanced PBX offered unparalleled switching speeds & volume along with features such as extension dialing, call forwarding and integration of answering machines.

As Digital Systems became more sophisticated along with powerful computing systems, PBX was integrated to computer systems for a massive boost in its functionalities via TDM (Time Division Multiplexer) and thus the modern PBX we commonly know was born. This new tier of PBX systems could switch/forward thousands of calls per minute based on the conditions programmed and could incorporate smart-extensions along with features such as recorded message or music playback on waiting.


  • Very efficient, accurate and faster than manual switching.
  • Highly reliable and can work even during power outages.
  • Usually not affected by the climatic condition.
  • Best audio quality since Digital Compression-Decompression is minimal.
  • Minimal latency thus no recognizable delay in exchanges.
  • Can convert existing phone lines and extension lines to digital via TDM Switchboards.
  • Programmable Extension Dialing and Call Forwarding.
  • Programmable Music and Voice Messages Playback.
  • Multiple extension lines with fewer physical phone lines using TDM.


  • Not mobile. The calls are all delivered to fixed landline phones. Hence, bound to the desk all the time.
  • Prone to attenuation/noise and signal loss due to being analogous in form during transmission & reception.
  • Requires expensive and very complex primitive-hardware.
  • Takes too much space for installation and workplace can get crowded by numerous running wires.
  • Lacks too many features in comparison to modern Virtual Business Phone Systems thus being very less productive.

IP PBX (or) Internet Protocol PBX

The earlier PBX systems even with Computer Integration lacked one major breakthrough in communication technology, the Internet! The IP PBX utilizes the Internet and thus the Internet Protocol (IP) to carry out communication.

Prior to IP PBX, the communication was carried through The Phone Companies’ physical network and the audio signals were in analog form at both ends.  This caused noise and sometimes the audio could get much distorted at reception to understand. And with a LAN, the IP PBX systems were best suited for complex network structures with multiple computer systems and terminals.

Basically, the IP PBX systems use Telephones plugged into Computers via a serial communication interface such as USB and thus the analog voice signal is converted into digital form and is transmitted over the internet connection to the destined IP/SIP Address in the form of IP packets. These IP packets are decoded and converted back to the human understandable audio signal.

This network can consist of Computer systems with plugged in Telephones/Headphones with mic or IP-Phones with unique pre-allocated SIP Addresses which are directly plugged into the router.

The IP PBX works great for handling communications over the internet completely using fixed IP Addresses or SIP Addresses. The only requirement is both the terminals have an active Internet Connection with enough bandwidth, a static IP Address and an Audio Communication Device (such as USB Telephone, Headset-Mic).

When in absence of Internet at the caller’s end, everything can be handled as usual once the actual call is delivered to the Local IP PBX Server via PSTN (Public Switched Telephone Network).

The IP PBX offers massive boost in functionalities compared to PBX due to direct intervention of computing technology and an independent high-bandwidth communication network (Internet/LAN) that can carry out additional operations such as multiple call forwarding, call recording, call scheduling, call logging, remote extensions, audio transcription, voicemail-to-email and so on.  

The only difficulty is the calls can be delivered to physical phones via PSTN and over the Internet to the known IP Addresses or SIP via an IP-PBX software or service.

IP PBX is technically a form of localized VoIP to be specific. And often IP PBX and VoIP are confused with each other due to their similarities.


  • Lower operating cost and equipment cost than traditional PBX system due to the use of LAN.
  • Easy to move, replace and reroute calls over the internet.
  • Unlimited extension-terminals possible from a local IP PBX Server.
  • Thousands of calls can be connected within a building using a single IP PBX server.
  • Simple to manage and integrate with software and systems.
  • Completely programmable and thus allowing many advanced computer-assisted features such as Call Queuing, Call Forwarding, Call Cascading, Smart-Extension, Voicemail-to-email, Audio Transcription and so on.
  • Completely functional as a normal phone via PSTN interfacing.


  • Requires high investment for initial hardware.
  • Conventional Inbound and Outbound Calls are limited by Physical Lines.
  • IP-based calls completely rely on Internet Connection. Power outages or Internet Service issues can hinder the function.
  • Mobility is limited by hardware requirements.
  • Long distance calls require being completely Internet-based else carrier calling charges apply.
  • Needs a locally hosted IP-PBX Server and system software to integrate and manage the entire system.

VoIP (or) Voice over Internet Protocol

Like mentioned before, VoIP is more of a large scale IP-PBX system where the VoIP service is hosted by a company for the business.

VoIP based Virtual Phone Systems are regarded as Cloud-Based Virtual Phone Systems because it is usually hosted or is cloud-based where it mimics the traditional-PBX setup of multiple physical lines from a caller’s perspective.

The VoIP-based Virtual Phone Systems can basically use any Internet-Connected Device to receive, make or monitor audio calls to literally any physical phone or internet phone without any hassle and thus stay mobile all the time without being tied to a desk.

[bctt tweet=”The Implementation of VoIP was the only solution that would allow voice traffic at a very small cost – Jeff Thompson” username=”CallHippo”]

They can handle thousands of inbound and outbound calls simultaneously while treating each call according to the prior set instructions via the software. VoIP based communication on the surface can seem too straightforward whereas, they undergo too many switching in reality at multiple levels before getting delivered at the destination.

VoIP communication is completely governed by the VoIP Calling Software and thus it provides maximum functionality and control. VoIP Calling Software can easily integrate with Professional Business Software such as CRM and SCM for more refined control and monitoring. And being comparatively least expensive they are best for any business, So it can be considered as best virtual phone systems for small business and startups.

Another beauty of VoIP is, even small business & startups can get local & toll-free phone numbers for multiple countries to look big in the eyes of a customer. From most of standard VoIP Service Providers, Businesses can even get local phone numbers for more than 50+ countries around the world!

VoIP offers multitudes of calling features that even an entire article can’t comprehend! VoIP services are very affordable and they don’t demand more than existing hardware and a good bandwidth internet service to reach all the devices.

VoIP based Virtual Office Phone Systems best suite Small Businesses and Startups/SMEs who can’t afford a completely owned cloud-based VoIP Phone System or IP-PBX on their own but requires intelligent call management and integration along with infinite intelligent extensions for the fairly low subscription price.



  • Comparatively, least expensive and requires zero to minimal initial investment.
  • Make free audio calls, video calls and conference calls to anywhere in the world.
  • Can work with existing hardware and integrate with any professional business management software.
  • Get Local & Toll-Free Virtual Phone Numbers instantly from over 50 Countries around the world.
  • Completely independent of location. Calls can be switched to any device connected to the network anytime and anywhere.
  • Supports all calling features such as Call Queuing, Call Cascading, Smart-Extension, Call Waiting, Call Scheduling, Voicemail to Email with Transcription, Virtual Receptionist Service and so on.
  • Maximum Uptime. Safe, Secure and Reliable communication with cloud-based hosting service.
  • Service Add-ons such as Unlimited Text-Messages, Employee Monitoring, Workload optimization, Email-to-Voicemail conversion and more.


  • Requires stable and high-bandwidth internet connection to work.
  • Platforms might require interfacing to be compatible with software integration.

The Bottom Line

Virtual Office Phone Systems are the most important communication aspect of every business and understanding each viable option can make the difference between million-dollar turnover and bankruptcy. Technological advances over the years have turbocharged the productivity we could achieve from a dedicated Virtual Phone System. Considering all the fronts of a business communication requirement, Cloud based Virtual Phone Systems Service is best suited for every business, especially startups giving functionalities rivaling that of a corporate giant right out of the box.



22 Comments to “Understanding the Basics of Virtual Office Phone Systems- PBX, IP PBX and VoIP”

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    Greatly appreciate for presenting such an in-depth and insightful blog on IP phone systems. It is important to keep in mind that every phone system has its purpose. Although the PBX is the legacy telephony system, it is still widely used across the globe. However, it is wise to upgrade to the IP PBX because it is more cost-effective that way for the overall communication expense.

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